Congressman wants more info in new IRS privacy rules

The House Republican who oversees the Internal Revenue Service budget wants to know more about a proposal to change privacy rules governing tax preparers who handle taxpayers’ personal information.

The proposal alarmed consumer groups and some lawmakers, who fear the changes could open taxpayers to more widespread disclosure or sale of personal information.

The IRS said the recommended alterations give tax preparers only one new power: the ability to advertise financial products sold by other companies to their tax clients if those clients consent.

Rep. Joseph Knollenberg, R-Mich., chairman of a House Appropriations subcommittee, plans to solicit more details from IRS Commissioner Mark Everson at a Wednesday hearing examining the president’s budget request for the tax collectors, a spokeswoman said.

The IRS wants to make changes to regulations, laid down in 1974, requiring tax preparers to get consent from a taxpayer to use or disclose information provided on a tax return. The tax collectors say the old rules need to be updated now that many people prepare their tax returns electronically.

The regulations say a tax preparer can disclose tax return information to a third party if the taxpayer gives consent. They also say a tax preparer can market other financial products to clients if those products are from an affiliated group, such as a bank or lender within the same holding company.

The IRS wants to drop the requirement that companies must be affiliated for tax preparers to have permission to market other financial products to their clients.

Several consumer groups say that change eliminates a restriction on outside companies getting hold of taxpayers’ personal data for marketing purposes. But the IRS says the regulation has always allowed outside companies to use tax return information if the taxpayer consents.

Tom Ochsenschlager, vice president for taxation at the American Institute of Certified Public Accountants, made the same argument and said consumer groups have misinterpreted the current rules.

The debate under way over the proposed changes shows that people are “just now realizing the information could have been shared all along,” he said. “It also speaks to the fact that it wasn’t commonly done in the past.”

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